Conformed Copy - L4111 - Second Subic Bay Freeport Project - Supplemental Letter 1

Page 1 SUBIC BAY METROPOLITAN AUTHORITY July 18, 1997 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Dear Sirs: Re: Loan No 4111 PH (Second Subic Bay Freeport Project) Representations In connection with the Loan Agreement to be entered into today between the International Bank for Reconstruction and Development (the "Bank") and the Subic Bay Metropolitan Authority ("SBMA"), SBMA hereby undertakes and warrants to the Bank that: 1. The financial statements dated December 31, 1996, copies of which have been furnished to the Bank, correctly set forth the financial and operating condition of SBMA as of such date, and that since such date there have been no material adverse changes in the financial and operating conditions of SBMA. 2. SBMA is not engaged in litigation as plaintiff or defendant, the outcome of which might materially and adversely affect its financial condition. 3. SBMA has no outstanding agreements or liabilities, contingent or otherwise (including taxes) which might materially and adversely affect its financial condition. 4. No debt of SBMA is secured by any mortgage, pledge, charge, priority or other lien, and no contract or arrangement exists for the creation of any such mortgage, pledge, charge, priority or other lien. 5. There are no existing defaults in the payment of principal of, or interest or other charges on, any of SBMA’s debts. 6. SBMA is not in violation of, and execution and delivery of the Loan Agreement and compliance with all its terms do not and will not result in any violation of, any provisions of any existing agreement, franchise, concession, license or permit, or of any statute, law, decree, regulation or any other legal rule of a similar nature presently in effect and applicable to SBMA. 7. SBMA is a duly existing authority under the laws of the Republic of the Philippines with full authority to carry out its present business, to carry out the Project and to execute and deliver the Loan Agreement, and has furnished to the Bank true copies of its Charter and By-Laws, and of all other legislation presently in force and effect and governing or applicable to the operations of SBMA, as well as of its By-laws as presently in effect and governing SBMA. It is our mutual understanding that, in making the Loan and entering into the Loan Agreement with SBMA, the Bank may rely on the representations contained herein. Very truly yours, By /s/ Richard Gordon Authorized Representative Page 2